EUROPE – The European Parliament’s Economic and Monetary Affairs Committee (EMAC) has approved two new Council “Common Positions” to expand the European market in unit trusts and other UCITS products – in a move that includes “OTC” (over-the-counter) derivatives for the first time.

The common positions take the form of two amendments to the existing 1985 directive and are based on home country supervision. The types of investment are specified, with “OTC” (over-the-counter) derivatives included and new rules on the management of funds - designed to achieve what EMAC says will be a balance between investor protection and investment freedom.

Recommending approval of both common positions, Parliament rapporteur Olle Schmidt noted that the compromise included the contentious issue of capital requirement, which provides for a minimum capital of €125,000 plus an additional amount relating to the size of the fund.

Since the Council’s compromise was only reached through a qualified majority (Luxembourg voting against), the committee has followed Mr Schmidt’s recommendation not to tamper with substantive elements of the compromise and approved just one amendment designed to ensure that several technical points of concern to the financial services industry were taken up in a review.

The amendment also provides for the inclusion of a “grandfathering” clause to exempt existing UCITS investments that would have difficulty in complying with the new legislation from the new rules for five years.

The draft recommendation will be considered at today’s (October 11) Strasbourg plenary session.